Budget Strategies

A note from the Superintendent

Members of the DASD Community,

Several months ago, we began a lengthy series of budget-related
inquiries with Keith Knauss, a former Unionville-Chadds Ford school board
member. Mr. Knauss’s inquiries specifically focused on our budgeted savings
account. Mr. Knauss, a key witness on
behalf of the gentleman who sued Lower Merion School District, questioned our elected school
board’s fiscal savings strategy. We
engaged Mr. Knauss in a series of back and forth emails and eventually
agreed to disagree on how best to budget for both school children and
residents in a rapidly growing district like Downingtown.

In July, we received a similar inquiry from Mitch Blacher, an NBC10
Investigative reporter, asking for an on air interview about our budgeting
practices. I felt it was impossible to
reduce a conversation about fund accounting practices, fund balances, the
difference between Capital and General Funds, debt elimination, district growth
needs and the legislative landscape to a brief minute or two minutes of on-air
time, so the district elected not to participate in an on camera interview.

We did, however, provide the reporter with emails, attachments, and
a link to the wealth of Downingtown fiscal information on our website,
including multiple years of audited financial statements and budgets. We referenced the Association of School
Business Officials International Meritorious Budget Award that the district has
earned for the past five straight years. This award acknowledges that our
budget and financial information are consistent with
the strict criteria required to meet the high standards ASBO demands.
We sent him the award’s criteria. We were one of only seven
Pennsylvania Districts earning this prestigious award last year. We also
cited the consistent approval of our budgets by independent outside auditors and conveyed the positive responses our residents had expressed to the district for NOT raising taxes since July of 2012.

On Wednesday, September 14th, the reporter and a
cameraperson appeared at the School Board meeting insisting that I respond to
his questions. I agreed to do an
interview following the meeting. In the filmed
dialog that followed, Mr. Blacher did ask about the district’s general fund savings
methodology. I explained that DASD
typically saves about 7% of our annual budget. In fact, since 1994 we have
averaged about a 7% savings from our yearly budget calculations. This historic
practice of sound and prudent management by past and present Downingtown school
boards is the reason we are able keep up with the growth in the district
without further burdening taxpayers. In fact, because of
this savings account, our community has had no tax increase over
the past 4 years while maintaining an exemplary educational program.

While we do not know for certain, we believe Mr. Blacher will be
doing a follow-up story on the ruling by a Montgomery County judge that Lower
Merion School District had unnecessarily raised taxes over the ACT 1 limit when
it actually had money in reserve. The judge decreed that Lower Merion must
lower the school board approved 4.4 percent tax increase it had imposed for the
current school year to a 2.4 percent increase. Since our District
has not raised taxes for residents in 4 years, you may be asking what the
connection is and what’s newsworthy about Downingtown’s budget practices? We’ve
been asking the same questions.

DASD cannot be compared to Lower Merion in terms of budgeting. While
Lower Merion has had tax increases these past four years, Downingtown has
not. In fact, one of the Downingtown School Board goals for the
2016-2017 school year is to have a fifth year of no tax increases in our
district. This is all because of prudent financial planning and saving over
many years.

According to the Commonwealth Foundation, Lower Merion spends
approximately $28,173 per student each year while Downingtown's per pupil
expenditure is approximately $16,029 per student a
year. Let me be even clearer, if Downingtown spent what Lower Merion
spends per student, our budget would be $411 million annually.
For the record, our budget is $211 million annually.

Downingtown has much less debt service than Lower Merion, having
paid down over $65 million dollars of debt these past few
years.

We seem to have similar enrollment growth, yet we once again differ
from Lower Merion. Lower Merion Superintendent Robert Copeland told
an audience at their Monday night Board meeting that his district needed to
raise taxes “because of staggering enrollment growth”, facing a 20 percent
increase in the last decade. Downingtown has added 323 students
just this summer alone and again, because of our financial foresight
concerning growth, did not have the need this year to raise taxes.

To accommodate that enrollment growth, Lower Merion has built
two new high schools. Downingtown creatively built a 6th grade
center and renovated our oldest building to become the Downingtown
STEM Academy; one of our nation’s highest rated high schools. By doing
this, we saved taxpayers over $150 million in anticipated debt. This is a
huge savings since the original plans for a new full high school campus and a new full middle school
campus were replaced with more imaginative, less expensive
solutions.

One area where Lower Merion and Downingtown are comparable is in the
academic standing of our school systems. It’s well documented that the
strength of the school system in one’s community is directly
correlated to the property values of one’s home. Lower Merion and Downingtown
are comparable in educational prestige. With highly acclaimed schools in both communities, property
values in our two districts have been maintained and, in fact, increased in
many areas. In a recent Philadelphia Inquirer article about the
aftermath of the Lower Merion court decision one resident
“applauded the district’s foresight” and another said, “Our property values are
what they are because of the strength of our schools.” How
true!

Let’s turn to the issue of a budgeted savings account that was
highlighted by both Knauss and more recently by the Channel 10 reporter. As any homeowner knows, you need to look
forward and plan ahead. If you spend everything you bring in, you won’t
have the money to fix a roof, send a child to college, or retire securely.
The district’s 20-plus year of calculated financial planning for growth tied
inseparably to the Board’s saving strategy of approximately 7% each year has enabled
us to pay down debt, maintain a strong credit rating, build schools to
accommodate ubiquitous growth, weather the great recession, withstand the PSERS
crises, endure the dysfunction in Harrisburg over state budgets, and most
importantly to hold taxes to a zero increase over the past 4 years and beyond.
Our savings has also enabled us to maintain a AAA bond rating from
Moody’s that enables us to borrow money at a much lower interest rate
than most other districts.

I explained to the reporter on Wednesday evening that it was
important for a school board to have a savings strategy to meet the
needs of a growing district and be able to provide our residents with 4
years straight (and hopefully more) of zero tax increases. It’s an
approach supported by Dr. William Hartman, who is the preeminent Pennsylvania
school budget strategist in the Commonwealth. Hartman, is the Penn State
University Professor of Education Emeritus and Executive Director of the Center
for Total Quality Schools. Dr.
Hartman said this about our budgeting strategy over the past 20 plus years, “Because
of the strength of the Downingtown Area School District’s budgeting over the
past 20 years, Downingtown weathered a perfect storm of increases in PSERS
expenditures, increasing health care costs, rapid and extensive increase in
payments to charter schools, shrinking tax bases as the result of tax
assessment appeals, historically low Act 1 indices, unstable legislative
climates and non-existent investment growth better than any other Chester
County school district.”

Because of these inquiries over the past few months, we asked Dr.
Hartman to complete an analysis of our budget. He has done so and will be
presenting his comprehensive examination of our budget practices at the
Tuesday, October 11, 2016 School Board meeting. Once Dr. Hartman
presents the report we will include it on the website. In the meantime, we invite you
to visit our business office website (click here for that webpage) if you would like to review the extensive
budget-related documents that were provided to the reporter and Mr. Knauss.